Fresh turmoil may await Harper at G20 summit in Mexico
When Prime Minister Stephen Harper arrives in Mexico this weekend for a summit of the world's 20 most important economies, fresh political and economic turmoil might be waiting for him.
While Harper is on his way to the G20 summit in Los Cabos, which gets underway Monday, Greeks go to the polls in a vote that could send ripples through financial markets and set the stage for the country's exit from the 17-member bloc of nations that use the euro.
Many Greeks strongly reject the tough austerity measures, such as cuts in public sector pay and pensions, imposed upon Greece in return for its two multibillion-euro rescue packages to help pay off the country's massive debt.
Last month, Greek voters punished politicians who backed the belt-tightening in favour of fringe parties that promise to ditch the austerity measures that were a condition of receiving the bailout deals.
If enough Greeks decide to vote for the anti-austerity parties in Sunday's election, it could result in the country defaulting on its debts and getting kicked out of the eurozone.
Finance Minister Jim Flaherty foreshadowed the turmoil that such an outcome might bring.
"It could result in a disruptive moment if the Greek election were to result in a disassociation of Greece from the pact that our European colleagues have developed with respect to austerity," he said this week.
"We'll deal with it as it comes."
As it now stands, Greek leaders are already warning they risk running out of money by July — despite their latest bailout — because tax revenue and other sources of potential income are quickly drying up.
The European debt crisis is not confined to Greece. Spain, the Continent's fifth-largest economy, just agreed to accept a bailout for its cash-strapped banks. Portugal and Ireland have already received bailouts. Italy is mired in debt.
Canada rejects IMF bailout
Countries outside of Europe have pledged billions of dollars to the International Monetary Fund to stabilize the world economy, if the need arises.
Canada and the United States reject the idea of contributing to the IMF.
"The Europeans, in our view, are wealthy countries, for the most part, and they have adequate resources. These are among the wealthiest countries in the world," Flaherty said Thursday.
"There's a role for the IMF, of course there is. Often the IMF has been involved in assisting in the implementation of plans, in monitoring plans, particularly in making sure that sovereign countries fulfil their obligations, that they implement their budgets and commitments.
"That's an important traditional role for the IMF, and Canada has always been a major supporter of that role for the IMF."
At an economic conference this week in Montreal, Harper boasted he would urge other G20 leaders to adopt what he called the "Canadian approach."
"This will be Canada's message at the G20 summit: economic growth and fiscal discipline are not mutually exclusive; they go hand in hand," the prime minister said.
"In fact, Canada's strong record of fiscal discipline is one reason we have weathered the economic crisis so much better than many others. We had budget surpluses and a low and falling debt burden when the crisis hit.
"Financial discipline is what enabled us to quickly put in place extensive, effective stimulus measures when they counted the most."
U.S. President Barack Obama has also called on European leaders to do more to overcome the crisis.
Germany, France split over response
Harper and Obama have a like-minded ally in German Chancellor Angela Merkel, who is of the opinion that Europe's debt crisis can only be overcome through fiscal discipline and strict austerity measures.
Other leaders do not share her point of view.
France's new Socialist President François Hollande, who had breakfast with Harper last week in Paris, believes in spending and investment to encourage growth. He has promised to turn on the spending taps as a way to solve Europe's crippling public debt crisis.
On Thursday, Merkel again appealed to European leaders to rein in spending as she predicted the region's economic woes will dominate the G20 summit.
"We must all resist the temptation to finance growth again through new debt," she said in an address to the German parliament before leaving for Mexico.
"We can only overcome the crisis when we tackle it at its roots, the high debt level and the lack of competitiveness in some member states."
All the attention paid to Europe next week could distract from Canada's bid to join a proposed Trans-Pacific Partnership agreement.
Canada, Japan and Mexico are all trying to get a seat at the negotiating table. But the strongest reservations about letting Canada pull up a chair are believed to come from the United States and New Zealand.
Canada's trade restrictions on dairy and poultry products present the biggest obstacle to joining the nine-country talks. Canada has a supply-management system that controls milk and egg prices while setting prohibitively high tariffs on imports.
— With files from The Associated Press